International Monetary Policy Coordination and Financial Market Integration

Alan Sutherland ()

No 4251, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper analyses the implications of financial market structure for the existence and size of welfare gains from international monetary policy coordination. Policy coordination is analysed in a two-country stochastic general equilibrium model simple enough to yield explicit analytical solutions. Welfare gains from coordination are found to be largest when: the elasticity of substitution between home and foreign goods differs from unity; international markets in state-contingent assets allow full consumption risk sharing; and asset trade takes place before monetary policy rules are determined. Welfare gains are found to be much smaller when there are no international financial markets.

Keywords: Monetary policy coordination; Financial integration; Risk sharing (search for similar items in EconPapers)
JEL-codes: E52 E58 F42 (search for similar items in EconPapers)
Date: 2004-02
New Economics Papers: this item is included in nep-fmk, nep-mac and nep-mon
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Citations: View citations in EconPapers (58)

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Working Paper: International monetary policy coordination and financial market integration (2002)
Working Paper: International monetary policy coordination and financial market integration (2002)
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